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A TCL Interview: Jeffrey Carr, VP, General Counsel and Secretary of FMC Technologies
“The Client,” is a new feature of The Complete Lawyer. We bring you candid, thought-provoking interviews with the world’s leading corporate counsel conducted by long-time TCL contributor, Marcie Shunk, of BTI Consulting. BTI’s senior researchers conduct thousands of interviews each year with corporate counsel, delving into the nuances of client satisfaction, probing for new, undefined issues and delineating drivers behind key market trends.
This month, we are delighted to feature Jeff Carr, General Counsel of FMC Technologies. Jeff is an outspoken leader in the field of legal services.
MS: Thanks for joining us for this discussion today, Jeff. Our topic is how corporate counsel are managing their legal departments in the face of the declining economy. Could you please describe your role and your key responsibilities at FMC Technologies?
JC: Sure. I’m the VP, General Counsel, and Secretary of the company. I break down the traditional general counsel role into three areas. First, I’m the strategic legal advisor to the board and the senior management of the company. Second, I provide cost-effective legal services that are the right size for the company. Third, I develop and manage a high performance legal team.
MS: What are your top goals and your priorities for your legal department in 2008?
JC: Most important is to further manage and develop my people. We don’t have any significant legal issues going on; we’re just blocking and tackling right now. We are completing the spin-off of about 20 percent of our business, a major project that consumes a lot of time. But we’re really focused on maintaining the ethical compass of the company, developing our compliance programs, reducing our costs, staying within our budget or below, and then continuing to develop the people on the team.
MS: What steps are you taking to achieve these goals?
JC: On the compliance side, we’re organized as a legal team; there is a primary lawyer for each of our four major business segments and a couple of other lawyers working beneath them. Each of those lawyers is responsible for delivery of legal service to that business segment, but each member of the team also has a sector specialty that is distinct from everyone else’s. It’s a kind of matrix organization: we have both line and specialty responsibilities. Suppose one of my guys is in charge of the delivery of legal services for the energy processing group. He may call on me on an international issue, someone else for a litigation issue, and a third person for an environmental issue. He’s the team leader, and we’re all team resources. We do a “make or buy analysis” on any legal work. Since it’s always cheaper for us to do the work in-house, we ask, “Do we have the capability to do the work?” and then, “Do we have the capacity to do the work?” If the answer to both of those questions is no, we go to our outside providers. Like most companies, we have a list of about 15 preferred legal providers whom we go to first; we call them alliance counsel, and they make up 85% percent of our spend. We use alternative billing with them. We only do performance based pay for legal engagements. We’re extremely rigorous about metrics, measuring performance and staying on budget. This year, we’re particularly focused on standardizing our processes and procedures as a legal team so we can leverage our internal knowledge…
MS: You’re talking about internal process changes.
JC: Lawyers are really good at reinventing the wheel because that’s what they get paid for. Plus, because they’re really smart, they always think to themselves, “Why should I ask somebody else? I can answer that.” But this thinking is irrelevant in today’s world. We’re trying to avoid spending a lot of money to answer the same question twice. Every time we answer a question, we’re trying to establish a process and then improve the process so that all lawyers ask themselves, “Have we done this before?” This will prove a tremendous savings for us. In 2001, we were spun off from another company that had eight attorneys, and the total company revenue was about $2.2 billion. Today our revenue is about $4.6 billion, we still have eight attorneys and our overall legal spend, internal and external, has stayed relatively flat since 2001.
MS: That’s remarkable.
JC: You can’t do that when firms are raising their rates every year because internal costs go up due to salary increases. The only way you can keep expenditure down is by what I call “creative denial of service.” When I talk to other clients, I talk to them in terms of empowerment: give people the tools to answer the questions themselves and then standardize those processes and procedures so that you’re not constantly answering the same question twice.
MS: And that’s working?
JC: (laughing) Yeah, it is; you know, you can always improve.
MS: Are there any other ways you’re managing your law firm differently to help you meet your objectives?
JC: Well, we do a couple of things a little differently than most folks. Most people use matter management systems these days—we’re very rigorous about doing that. We only accept bills electronically. We pay about 50% of our bills using a Visa purchasing card. This streamlines our back off as processing of invoices but it helps the law firm get its money more quickly. We also do constant performance evaluations on our law firms, a process that’s built into our matter management system. My attorneys can’t close a matter without doing a performance evaluation. These performance evaluations are then linked to compensation of the law firms. Another rigorous procedure is that the attorneys can’t close a matter without doing an after action. We want the focus to be both procedural (“How could we have handled this matter better?”) and substantive (“What could we do to avoid being in the situation?”). Then we put the matter into our management system and make it part of our process, ensuring that it will recur. We capture what we learn and then act on it.
MS: That sounds very comprehensive and really tight, so it works.
JC: It does. Like everything else, it’s probably better in theory than in practice but (laughing) we’ll keep getting better.
MS: From the viewpoint of a law firm, what is the one thing a firm could do to help you meet your goals and objectives?
JC: I’m thinking of Felice Wagner’s poem, “The Client.” The gist of it is this: “If only you’d ask, I’d be happy to say I wish you would do things more often my way.” Basically, it acknowledges that firms need to recognize that fundamentally we are not in the business of answering interesting questions of law, nor are we in the business of winning cases. We are in the business of making and selling equipment, products, and services to our customers. Legal services are an adjunct to that. They empower us and enable us to achieve our business objectives; they protect us from risk and they help us in controversies—and that’s all they do. It’s not part of our core competency to be great lawyers. As a company, our core competency is to manage legal affairs to help the business achieve its objectives. A law firm that understands that is helpful to us. A law firm that thinks that we’re interested in making new interesting questions of law is not.
MS: On a different note, how would you characterize the state of today’s economy?
JC: (laughing) Bifurcated. We’re primarily in the oil and gas industry, so the economy is superb for us. I recognize that elsewhere it’s different.
MS: Some of us don’t feel so good about that.
JC: Absolutely. But with oil at $120 or $150 a barrel, there is an increased demand for our products and services. From our standpoint, at a micro level, that’s a good thing. From a macro level, when the economy’s in distress, it is problematic because this can’t continue; it’s unsustainable. Even though our business is doing extremely well, our legal team is under intense pressure to reduce our costs, increase our performance, and manage risk better. Businesses look to us to help them manage their legal risk because that’s ultimately what gets a company in trouble. So our take on the economy may be a little bit different than others but the dynamic is the same.
MS: Have you seen a change in the types of matters you’re facing because of this downturn?
JC: We haven’t. I know other sectors have, particularly the financial service industries. We don’t play in that particular pond. We do see some increasing bankruptcies. But that’s not a threat to our business as long as we manage who we’re doing business with and how we manage through this period. There’s a little more pressure on employment, I suppose. We’re not letting people go but some of my brethren are and so that would increase the demand for employment-type services. But no, in general, we’re not seeing a huge change.
MS: Do you think that if the downturn continues it will have more of an impact on your legal issues?
JC: Sure. It’s inevitable that we’ll move away from a hydrocarbon economy. When that happens, we’ll have to reinvent ourselves, and that will create new challenges for the legal team as well. Personally I like change; it’s invigorating and exciting. I think the biggest challenge we’re facing concerns talent. How do we manage and motivate people in organizations in which staff departments like law are facing reduced head count? We’re working with people from a new generation who have very different perspectives on work/life balance, dedication to work, what it means to be a lawyer.
MS: What role could outside lawyers play in helping you navigate the economy as it is now?
JC: You know, the best thing that they could do is stop paying first-year associates $160,000 a year. Frankly, I know firms have to pay new lawyers top dollar to get good people. Their salary structure is their issue, not mine. My issue is that I’m not going to pay for it. I’m not going to permit law firms to pass through those costs to us. This means that law firms are going to have to change their economic model and become more efficient over time. If they wish to maintain their levels of profitability without increasing their cost to the client, they’ve got to find new ways to deliver legal services and focus on reduction of cost as opposed to growing profits through simply increasing the top line. They’ve got to increase their profit margin, and they’ve got to start focusing on their costs. I don’t see any focus on these issues in the law firm market today. That’s the single most important thing that they could do. The second thing is to figure out a way to leverage their knowledge base so that they are not charging us to answer the same question twice. But this requires them to completely change their billing model which is not based on selling hours. The more often they answer the same question twice, the more hours they get to bill.
MS: Do you have any other insights that you’d like to share with your readers?
JC: Two points. First, we need our law firms to survive and be profitable, so we can’t treat them simply as vendors; we need to find new ways to partner with them so that they can be profitable while fulfilling our needs. Second, the reason the industry has not changed is because the people on my side of the table aren’t changing. We’re simply complaining, and that’s not a particularly effective form of dialogue. We have to work together to find ways to change this industry and make it both profitable and sustainable.
MS: Jeff, it’s been a pleasure speaking with you. Thank you for giving us your input.
JC: Thank you, Marcie; it’s been my pleasure.
